A working area of the Financial Regulatory Reform Initiative

Objective

The initiative will examine how the new regulatory regime established under the Dodd-Frank Act impacts capital markets. The preliminary objective is that such regulation should protect investors’ rights and promote capital formation by ensuring that financial markets operate in a fair, competitive, and transparent manner.

Strategic Approach

The initiative will review the Volcker rule and its impact, the new regulatory regime for derivatives activities, and the impact of that regime on end users. The initiative will further review the regulation of money market funds and other key participants in capital markets, including private equity and hedge funds.

Preliminary Issues

• Volcker Rule
• New clearinghouse requirements
• Extraterritorial impact of securities regulation
• Lincoln Amendment
• Single party counter credit limits
• Money market mutual funds
• Hedge funds and private equity
• Credit Rating Agencies

Research Questions

• Can the Volcker Rule effectively work? If not, should it repealed or replaced? If so, what will be its effect?
• Will clearinghouses serve to reduce risk through greater transparency or concentrate systemic risk by proliferating in response to single-counterparty credit limits?
• How will new margin requirements impact end users of credit?
• What impact will new capital markets regulation have on the competitiveness of U.S. firms?
• Are post-crisis SEC reforms adequate to ensure greater stability of MMMFs?
• Would credit rating agency reforms lead to better information for market participants?

Deliverables

The initiative will release a white paper that recommends modifying the Dodd-Frank Act to the extent that the capital markets provisions of the Act deviate from or conflict with the stated objective for capital markets regulation.